India – A Long Race in Solar Power

Thursday, Jan 22, 2009

India, the world’s second-most populous country, is facing a looming energy crisis. Soaring oil prices, and continued dependence on a few countries for oil, has led to the use of renewable energy sources to secure energy. Given that this is a tropical country rich in sunlight, solar energy offers the most practicable solution to overcoming growing energy demand. The daily average solar energy incident over India varies from 4-7 kWh per square meter, depending upon the location.

India still is not among the world’s top 10 solar energy generators. But at the current pace of 20 percent annual growth, India could emerge as the fourth largest market for solar energy after Germany, Japan and China in the coming years. So far, around 1.4 million solar Photovoltaic (PV) systems, together amounting to about 110 MW peak solar photovoltaic module capacity, have been installed – largely for off-grid and agricultural pumping applications. The country has some of the best quality silica reserves in the states of Orissa and Andhra Pradesh. With over 50,000 villages in India without electricity, solar power has enormous potential to meet rural electricity needs, improving the lives of millions of Indians and meeting critical agricultural, educational and industrial needs.

It is perhaps the only country in the world with an independent Ministry for renewable energy, known as the Ministry of New and Renewable Energy [MNRE] (

To keep pace with the global rise in the PV industry, Government of India (GoI) has instituted solar industry programs on both the demand and the supply side. On the demand side, GoI announced a Feed-in-Tariff (FiT) providing financial support up to INR 12 per kWh for Solar PV projects promising a 10 year commitment with a cap of 50 MW ( Several state governments followed suit by announcing FiT incentives with caps ranging from 50MW to 500 MW, the most prominent among them being West Bengal, Gujarat, Haryana, Punjab and Tamil Nadu. The government of Gujarat (located in western India) recently announced a policy to target 500 MW in the state. The Feed-in-Tariff will be US$ 0.27/kWh for a period of 12 years.

The maximum size per project is 5 MW to enable more customers. Developers will also have access to an 80% accelerated depreciation benefit under the Income Tax Act. The state has already received proposals worth 2,000 MW. In response to this policy, Astonfield Renewable Resources Limited signed a deal for 200 MW and is already in talks with global majors from Europe and USA for technology tie-ups. TATA-BP Solar (a joint venture between the TATA group and BP Solar) announced that it is setting up a 5 MW project. In addition, more than 2,500 MW worth of applications have been submitted to state governments of Rajasthan, West Bengal, Punjab, Haryana, Tamil Nadu and Karnataka.

On the supply side, during August 2008, GoI announced a semiconductor policy ( with cabinet-approved incentives to attract foreign investment to the semiconductor sector, including manufacturers of semiconductors, displays and solar technologies. GoI will bear 20 percent of capital expenditures in the first 10 years if a unit is located within one of the Special Economic Zones (SEZs), including a major economic zone in Hyderabad called “Fab City”. The minimum investment was set at INR 25 billion for semiconductor manufacturers and INR 10 billion for other micro- and nanotechnology organizations. The solar industry has been the chief beneficiary of these announcements under this incentive-based economic policy.

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